The great thing about reliable dividend stocks is that they continue to deliver cash flow during any economic situation. Bullish cycles result in high gains and dividends that serve as a bonus. When the stock market goes through a correction, dividend reinvestments allow you to accumulate additional shares.
Some dividend investors value income and look for the opportunities that offer the highest yields. However, if you’re looking for the hottest dividend stocks that have a realistic chance of outperforming the stock market, the yields probably won’t be high. You’ll have a difficult time finding any stock that yields above 2% and outperforms the market over a 5-year stretch.
Dividend growth stocks often make up for their low yields with double-digit dividend growth rates. Wondering which stocks offer a steady stream of dividends while beating benchmarks like the S&P 500? These are some of the hottest dividend stocks in the market right now.
American Express (AXP)
American Express (NYSE:AXP) makes money each time someone uses one of its debit or credit cards to facilitate a purchase. The fintech firm also has annual fees and other revenue streams that have helped it outperform the stock market. Shares are up by 31% year-to-date (YTD) and have almost doubled over the past five years. The stock comes with an 18.5 P/E ratio and offers a 1.14% yield.
The credit and debit card issuer continued its 2024 rally with a strong showing in the second quarter. Revenue increased by 8% year-over-year (YOY) while net income jumped by 39% YOY during that quarter. American Express’ profit margins continue to rise and came in at 20%. More than 3.3 million people acquired new American Express cards this quarter.
Many Wall Street analysts are bullish on the stock. It’s rated as a moderate buy, and the highest price target of $285 suggests a potential 16% upside from current levels.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) has been a captivating dividend growth stock for several years. The company has regularly maintained a double-digit dividend growth rate while outperforming the stock market for several years. Shares are up by 40% YTD and have more than quintupled over the past five years.
The semiconductor firm offers a 1.38% yield and is more attractive among options traders after the stock split. Additional calls and puts can increase volatility and inflate demand during bullish economic cycles. Broadcom’s position in the artificial intelligence (AI) industry sets it up for solid long-term gains. The company reported $3.1 billion in revenue from AI products during the second quarter of fiscal 2024. That was a record that came amid a 43% YOY revenue jump.
Broadcom’s recent acquisition of VMware has worked wonders for the company. More enterprises are adopting the VMware software, and that rising demand prompted Broadcom to raise its fiscal 2024 guidance. The company now expects to generate $51.0 billion in fiscal 2024.
Caterpillar (CAT)
While tech stocks get plenty of attention, several vital industries generate high returns without receiving as much attention. Construction is one of those businesses, and Caterpillar (NYSE:CAT) has been a leader in the industry for almost 100 years. It also happens to be a solid stock for long-term investors.
Shares are up by 20% YTD and have jumped by 164% over the past five years. Caterpillar trades at a 16 P/E ratio and offers a 1.61% yield for investors. The company has maintained an annualized dividend growth rate of 8.04% over the past decade, and recent earnings suggest that dividend growth can continue.
Profit per share increased by 54% YOY in the second quarter while revenue was roughly flat. The dividend aristocrat has paid dividends to its investors for 30 consecutive years and allocated $5.1 billion toward stock buybacks and dividend distributions. Rising profits and a dominant position in the construction industry suggest more gains in the future.
On this date of publication, Marc Guberti held a long position in AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.